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Rising Gasoline Prices Could Affect Fares, Says Qantas

Rising Gasoline Prices Could Affect Fares, Says Qantas
The largest airline in Australia, Qantas Airways, announced on Monday that it would spend more money than initially anticipated to address "customer pain points," but also issued a warning that rising fuel prices could compel it to boost prices above their current levels.
Investors questioned the airline's capacity to increase profits in light of its continually high costs after the report pushed its shares down as much as 2.5% to a one-year low.
The business, led by a new CEO, is attempting to strike a balance between ensuring customers that it is listening to their complaints about widespread service issues and assuring investors that it can control a rise in prices related to a shortage of oil.
A surge of flight cancellations and claims of misplaced luggage were caused by the airline's handling of the post-COVID travel revival, which accounts for three out of every five domestic airfares sold in Australia.
The antitrust authority sued Qantas last month, accusing it of selling tickets for thousands of already-cancelled flights in 2022, compounding the airline's problems. When the High Court ruled that Qantas' 2020 termination of thousands of ground personnel was unlawful, the airline also lost a union complaint.
The alleged "flying kangaroo" announced that it would now spend an additional A$80 million ($52 million) on "customer improvements" in addition to the A$150 million previously announced.
"This additional investment is aimed at addressing a number of customer 'pain points' through improvements such as better contact centre resourcing and training ... more generous recovery support when operational issues arise, a review of longstanding policies for fairness and improvements to the quality of inflight catering," it said in the trading update.
At the same time, it warned that if the 30% increase in fuel prices it has been dealing with since May remained, its anticipated half-year fuel bill would increase by A$200 million ($129 million) to A$2.8 billion.
"The group will continue to absorb these higher costs, but will monitor fuel prices in the weeks ahead and, if current levels are sustained, will look to adjust its settings," Qantas said.
"Any changes would look to balance the recovery of higher costs with the importance of affordable travel in an environment where fares are already elevated."
The firm will probably bear the higher fuel costs "until its target margins come under pressure, at which point it will seek to claw back those costs through capacity reductions and higher fares," according to RBC Capital Markets analyst Owen Birrell.
"We don't believe a material earnings shift is feasible from here given rising competition, growing consumer/business cost pressures and incoming re-investment in the product/platform," he said in a client note.

Christopher J. Mitchell

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